Lenovo to Lay Off 3,200 Employees as Profit Slumps by Half

The decline is largely due to a fall in Motorola handset sales

August 13, 2015 14:08 IST

Chinese computer maker Lenovo is set to cut 3,200 jobs worldwide, as its net profit plunged by over 50% in the June 2015 quarter primarily due to a fall in handset sales of Motorola, its wholly-owned subsidiary.

Lenovo's net profit fell to $105 million (around Rs 681 crore) in the April-June quarter compared to $214 million in the same quarter last year. Its pre-tax profit declined by 80%.

The company's revenue was also below market expectations. Although it went up 3% to $10.7 billion (nearly Rs. 69,446 crore), it fell short of a Thomson Reuters SmartEstimates' expectation of $11.29 billion.

The company's Chairman and CEO Yuanqing Yang said that Lenovo is facing the "toughest market environment in recent years".

Alarmed by a huge drop in profit, Lenovo said that it would cut costs by $1.35 billion (approximately Rs 8,762 crore) in by March 2016. It aims to achieve the target by retrenching 3,200 employees in its non-manufacturing operations; the jobs account for nearly 10% of the company's overall employee headcount worldwide.

The company also said that it would "restructure its mobile business."

A fall in Lenovo's profit is largely due to a slump in Motorola handset sales, which fell by 31% to 5.9 million units in the April-June quarter compared to the same quarter last year.

The company had bought Motorola last year in a $3-billion deal.

"I still believe this acquisition (Motorola) was the right decision...Except Apple and Samsung there is no third strong (global) player. I believe that will be Lenovo," Yang told Reuters.

In June, Lenovo said that it was examining the prospect of a facility in India to make smartphones and tablets. It's Puducherry unit currently manufactures computers.

Lenovo also plans to strengthen its smartphone business in India where it is currently the largest seller of laptops, PCs and tablets.